UK Stock Market Woes: Why Domestic Investors Are Turning Away

During their recent episode, Taylor, Carlisle, and Conor Maguire discussed UK Stock Market Woes: Why Domestic Investors Are Turning Away. Here’s an excerpt from the episode:

Tobias: Conor, just more generally, why do you think that the UK stock markets had such a rough run over the last five plus years? What’s driving that?

Conor: I think the headline reason that it doesn’t have those really attractive fast growing change-the-world-type businesses that the US has with the mag seven and those types of names. There’s a couple of issues affecting the UK market. Now, it’s viewed I suppose as a stagnant one. There’s a lot of lobbying now to get the UK government to try and stimulate renewed interest or equity investment in UK companies. I mean I think as well, there’s that kind of headline, US tech is just more interesting and faster growing and you’re going to get better returns looking at that, or just simplistically following that.

But I think then as well, you’ve got a real absence or retrenchment of domestic UK investors investing in UK. I mean, a lot of them have– You kind of have to follow the flows because in the short term, that’s what moves stock prices and that’s what moves the likes of Nvidia and Tesla and all these other household name companies. So, I think it’s really suffered from that. It’s probably suffered from a lack of forward thinking in terms of the government and other kind of authorities in the UK in terms of kind of trying to drive investment and encourage kind of risk taking, suppose whereas you have that real culture in the US, which the returns are– When you compare US and European and UK equities, that’s really played out over time. So, I think that they’re the main reasons really.

Yeah, just generally speaking at a more macro level, UK and Europe is in slower growth than the US, particularly post GFC. So, there is the perception that growth just isn’t there. Why would I invest in the UK when I can invest in something more attractive in the US? And I think as well, then one other factor is that UK really has suffered from a shrinking stock market. A lot of companies have been delisted or acquired over time through takeovers or other transactions, so that’s been a fact– And those companies haven’t been replaced. Private capital then has been a big factor in keeping companies that maybe otherwise would have listed from going public and keeping them private.

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